Pound Sterling Climbs Towards 180.000 Versus Japanese Yen on Bank of Japan Meeting

April 9, 2015 - Written by John Cameron

STORY LINK Pound Sterling Climbs Towards 180.000 Versus Japanese Yen on Bank of Japan Meeting

The Pound Sterling recorded strong gains against the Japanese Yen during yesterday’s session, sending the GBP JPY exchange rate up from an intraday low of 177.610 all the way up to a peak of 179.290.

The forward move on the day for GBP JPY was largely driven by a fresh bout of Yen weakness following the latest Bank of Japan (BoJ) monetary policy meeting. This month’s policy decision from the BoJ, which was announced during the early hours of yesterday morning, saw Asia’s second most significant central bank opt to maintain its ultra-loose policy stance which sees a pro-rate JPY85tn per year pumped into Japan’s money markets via Quantitative Easing.

However, the voting pattern of the nine-man policy committee revealed that the decision was not unanimous; one of the members had voted to scale back the nation’s massive QE scheme. The general opinion of Japan’s policy-setters is that their domestic QE scheme is now beginning to suffer from the law of diminishing marginal returns, with the nation’s current bout of go-ahead money printing now having less of an effect than was previously the case. In short, the ‘shock of the new is wearing off’.

The fact that Japan has missed its self-imposed target for raising domestic inflation to above 2% adds to the impression that QE is becoming less effective, but analysts fear that a tapering off of QE would leave Japan with a complete policy void which could lead to a prolonged depression for the nation’s economy. A drop of over 4% in the price of a barrel of Brent Crude on the global futures markets during yesterday’s session added to the BoJ’s woes; while the price of ‘Black Gold’ remains at its current ultra-low levels, the prospects of an upward spike in Japanese price inflation remains highly unlikely.

Looking ahead to today’s session, this lunchtime’s Bank of England monetary policy announcement is unlikely to yield many surprises. The BoE has maintained its key lending rate at a record low of 0.50% for several years now and there is no real prospect of any change into the medium term. Analysts forecast that Sterling-watchers will learn more about the BoE’s future policy direction when the minutes of today’s meeting are published later this month.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Currency Predictions Japanese Yen Forecasts Pound Sterling Forecasts